Contractor's Debt Act

In certain circumstances, an Owner (including the Owners Corporation in relation to a Strata Plan) can become liable to make the payment due to the Sub-Contractor by a Builder through the provisions of the Contractors’ Debts Act 1997.

In this regard:

(a) Pursuant to section 5 of the Contractors’ Debts Act 1997 an unpaid person such as a subcontractor can obtain payment from a principal such as the Owner (including the Owners Corporation in relation to a Strata Plan) in certain circumstances even though the money is due by the contractor/builder to the subcontractor.

(b) The Contractors’ Debts Act 1997 sets out the procedure for a subcontractor to obtain payment from a principal in relation to a debt due to the subcontractor by a defaulting contractor/builder.

(c) The Contractors’ Debts Act 1997 provides that the principal/Owner (including the Owners Corporation in relation to a Strata Plan) is only required to pay to a subcontractor a debt that would otherwise be due by the defaulting contractor/builder to the subcontractor if and only if the principal owed money to the defaulting contractor/builder in relation to the work at the site.

(d) Accordingly if the principal or owner (including the Owners Corporation in relation to a Strata Plan) does not owe money to the defaulting contractor/builder such as the builder then upon receipt of a notice from a subcontractor no money would be payable by the principal.

(e) If the principal owes money to the builder who is the defaulting contactor then the principal is not authorized to make the payment to the defaulting contractor/builder after receipt of the appropriate notice from the subcontractor.

(f) The Contractors’ Debts Act 1997 also sets out a procedure under sections 6 and 7 for obtaining payment and the debt certificate and the service of a notice of claim upon the principal.

(g) Upon receipt of that appropriate notice of claim from the subcontractor the principal is able to make payment of any money due to the builder to the subcontractor.

Watson & Watson have made applications on behalf of subcontractors under the Contractors’ Debts Act 1997 and have received payments from the Owner (including the Owners Corporation in relation to a Strata Plan) which would otherwise been paid to the builder. This has achieved payment for the subcontractor on a very economical basis when a builder failed to make the payment which was due under an Adjudication Determination or under Judgment obtained in a Local Court.